Justin Trudeau, Prime Minister and MP for Papineau, in an interview on July 20, 2016

Research on how Canadians spend child tax benefits suggests the money goes to things that enhance children’s wellbeing like food, education, and recreation.

FactsCan Score: True

Some Canadian families got a cheque in the mail on July 20, the result of a promise by Justin Trudeau’s Liberals during the fall election to scrap a universal child benefit in favour of one targeted at low-income families.

The tax-free payment, calculated using household income, is expected to leave low-income families with more money each year. An analysis by the Parliamentary Budget Office on the 2016 budget changes for families, including the child benefit, found that families with two kids and a combined income of $74,000 or $89,000 will have around $2,000 to $850 more in disposable income, respectively. Those in lower income brackets can receive more, up to a maximum of $6,400 per child under the age of six.

Asked what the money should buy, Trudeau told the CBC, “we know that people are going to spend it on healthier groceries, on school supplies, on summer camp for kids.”

Do we know what they’ll spend it on?

Canadians might spend tax benefit money on intended things like healthy groceries. Or they might spend it on unintended things like beer and popcorn. It’s also possible that we don’t know anything about spending habits and Trudeau is only talking about what he wants to see happen.

The first scenario is mostly correct. There is research providing evidence on how Canadian families spend income from tax benefits. It shows they buy things that contribute to children’s wellbeing.

The evidence: How families spend tax benefit money

A 2015 study, published by the University of Toronto’s Rotman School of Management, looked at how Canadian families spend additional income from tax benefits. Researchers analyzed 12 years of family spending in four main areas of education, health care, “stability” spending like rent and food, and “risky” spending like alcohol and tobacco. They looked at income received from the old National Child Benefit and Canadian Child Tax Benefit, both replaced by the new Canada Child Benefit.

The evidence tells the same story as Trudeau. Researchers of the study write, “families appear to be quite sophisticated in the way they spend their benefit income. They are purchasing more basic necessities, and as their resources increase, they are directing increasingly more of the money towards those items that directly affect learning, such as educational tools.”

Kevin Milligan, one of the study’s three authors and an economics professor at the University of British Columbia, said that in particular, the evidence suggested higher spending on computers, food, recreation, transportation, and rent. It found lower spending on alcohol and tobacco.

There are not many other studies in Canada to back this one up. However, the same authors are behind complementary studies, and research from other countries arrives at similar conclusions. One US-based study found higher family income from tax credits contributed to higher reading and math achievements. As one possible explanation why, the authors wrote that because tax credit payments “depend explicitly on having children in the household, families may feel some obligation to spend it on their children.”

Trudeau could be accused of being creative with the purchase details (summer camp versus general recreation), but overall, he’s right. The claim that families spend their payments in intended ways fits the evidence.